Pasado Company recently acquired two items of equipment. • Acquired a press at an invoice price of P3,000,000 subject to a 5% cash discount which was taken. Costs of freight and insurance during shipment were P50,000 and installation cost amounted to P200,000. • Acquired a welding machine at an invoice price of P2,000,000 subject to a 10% cash discount which was not taken. Additional welding supplies were acquired at a cost of P100,000. What is the total increase in the equipment account as a result of the transactions?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Pasado Company recently acquired two items of equipment.
• Acquired a press at an invoice price of P3,000,000 subject to a 5% cash discount which was
taken. Costs of freight and insurance during shipment were P50,000 and installation cost
amounted to P200,000.
• Acquired a welding machine at an invoice price of P2,000,000 subject to a 10% cash discount
which was not taken. Additional welding supplies were acquired at a cost of P100,000.
What is the total increase in the equipment account as a result of the transactions?
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